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When Ukrainian SMEs are given a choice between two options – to obtain certain benefits for their sector from the government or to make sure that the government creates equal conditions for all enterprises – they choose the latter.

Ukrainian exporters surveyed by the IER’s Trade Facilitation Dialogue project say that inefficient and non-transparent value-added tax (VAT) refunds system and high levels of bureaucracy are the biggest obstacles for export. The survey also reveals that smaller enterprises tend to be more burdened by complicated customs procedures and lack of transparency in the operation of tax agencies. Furthermore, unpredictable trade policy of Ukraine is a more significant barrier for small and medium exporters than for bigger ones.

Low demand and unfavorable political situation are the major obstacles for the development of industrial enterprises in Ukraine as of early 2015. This was demonstrated by the results of the quarterly business survey in which Ukrainian businesses assessed the 4th quarter of 2014. The survey was conducted by the Institute for Economic Research and Policy Consulting and presented in the special “Business Climate and Reforms –Ukrainian Business Expectations in 2015” report.

In recent days, the foreign exchange market rate stabilized in the interbank market at 21.50 UAH, and "gray" course (such as a bank card transactions) - at the level of 25-26 UAH. However, consumer prices in Ukraine continued to grow with the growth of expenditures on the various stages of production and supply, and in response to what is officially called "inflation expectations": everybody raised prices, then also we did.

Ukrainian small and medium enterprises are poorly represented on the European market and expect no major benefits from the establishment of the Free Trade Area between Ukraine and the European Union. At the same time, they are less wary of risks associated with the trade liberalization with the EU. In particular, small and medium businesses are less likely than big ones to suffer from sanctions from Russia and from a possible cancellation of free trade between Ukraine and the Russian Federation.

2014 was the most difficult year for Ukrainian economy in the XXI century. Ukraine faced economic crisis and military conflict in the East, while Russia annexed Crimea. Real GDP is estimated to decline by near 7% in 2014 due to a drop in domestic demand and weak external demand. High economic and political uncertainty resulted in low domestic and foreign investments. Private sector was not able to refinance its debts, which pushed financial account balance into deficit. The Government faced large liquidity gap as assistance from the IMF, the EU and other official donors was mostly used to repay previous debts including to Gazprom. As a result, fiscal expenditures were largely under-financed. At the same time, the authorities (during the year Ukraine received new President, new Government and new Parliament) were slow in implementing reforms in 2014. Still, the Association Agreement with the EU became partly effective in November 2014, defining Ukraine’s commitments on future reforms.

Most Ukrainian industrial enterprises support the European direction in the country’s economic integration. This has been shown by the survey of the Kyiv based Institute for Economic Research and Policy Consulting.The percentage of the enterprises that opt for economic integration with Russia and other CIS countries has shrunk almost three times compared to 2013. Yet, some in the Ukrainian industrial sector are concerned about possible Russian sanctions in case Ukraine pursues closer trade relationships with the EU.